Executive Summary : The wave of change in payment mix

Businesses are going global!

According to a joint survey by CRF-NACHA, 79% of the business organizations are shifting towards a global business model.

The same survey states that 79% of the organizations anticipate the volume of international payments to increase by 2020.

What does the global payments snapshot look like?

On analyzing various payment methods used across countries, specially in the Americas and EMEA regions, we have identified the top 11 most widely used payment methods, represented in this map.

Treasury teams of global enterprises should make it their topmost priority to not only accept these payment formats from customers, but accept them in an optimized environment for ensuring cost-effective acceptance, adherence to security policies, and scalable cash application.

Framework for evaluating payment types

The top parameters that treasury teams should evaluate different payment methods are:

Immediate reporting on facing a fraudulent transfer for refund from the bank

Cost of Transaction:

Per transaction, CHAPS charges 25 pounds. It is expensive due to its same-day payment processing. However, for a platinum banking partners, there is no charge

Remittance Mode:

The remittances are sent through the following channels:

Emails

Web portal uploads

Time for Processing:

CHAPS payments are processed the same day provided the payments are submitted and received by CHAPS by 2pm on a working day

According to a report, CHAPS is planning to hit 43.5 million transactions in 2026

SWIFT Payments :

Security:

SWIFT transfers involve payment orders instead of involving funds directly. Although they are considered to be safe but some common frauds could be due to:

Wrong recipient information leading to funds getting misplaced

Multiple bank layovers facilitating hackers to intrude

After multiple security breaches, SWIFT has tightened its bank policies with strong authentication and encryption. The tips to prevent SWIFT transfer frauds:

Double-checking the recipient information

Not getting involved into any suspicious transfer

Cost of Transaction:

In case of SWIFT payments, the cost per transaction is approximately 25 pound sterling

Remittance Mode:

The remittances are sent through the following channels:

Emails

Web portal uploads

Time for Processing:
If the payment request has been made on a business day before the bank’s cut off time, it would be processed on the same day or else, the next day

SWIFT has announced the integration of Payment Controls, an intelligent solution to ensure additional security to SWIFT payments

E-wallet Payments :

Security:

In e-wallets, every transaction is processed with encryption. So, customer’s account details are not directly provided to the merchant.

The common frauds include:

Theft of customer identity

Account takeover using loyalty programs as a tool

Tips to prevent e-wallet frauds:

Implementation of multi-factor authentication such as PIN, biometric for additional security

Implementation of AI to identify customer payment patterns, in order to reject fraudulent transactions

Cost of Transaction:

E-wallet processing depends upon the vender involved. For example, for Paypal, there is a fee for

cross-border transactions. For Apple Pay, while making the payment, if credit card is linked, then 3% of the transaction amount is charged

Remittance Mode:

The remittances are sent through emails

Time for Processing:

The amount is processed in seconds

Local e-wallets such as Payconiq, Payback, Paylib, Pingit, Vipps, Mobile Pay are gradually paving the path towards a healthy e-wallet landscape in Europe

CHAPTER
03

Arriving at a Preferred Payment Mix

Payment Acceptance Costs: Factors to Consider :

Bank Markup Fees :

During payment transfers, banks usually charge a markup fee. The markup price varies according to bank policies, credit rating.

Comparison of bank markup fees is crucial to analyze the bank partnerships

Cross-Border Fees :

For international transfers, a cross border convenience fee is charged. Eg, 1.20% for Visa and 1.00% for MasterCard. Thus a payment method with low or zero cross-border fees should be adopted. Eg, SEPA payments

Visibility :

Treasury teams are responsible for reporting the cash on hand figures to the finance leadership. Consolidating the cash balances across accounts is could be one reason why treasury teams are hesitant to support too many payment formats.

Buyer Credit Score and Dollar Amount :

Depending on the buyer credit score and dollar amount, a preferred payment method could be recommended. Eg, a low-risk customer having a low invoice dollar value could be convinced to pay using a low-security payment method but a high-risk customer having a high invoice dollar value should not be approached that way

Processing the Payments :

Auto-Remittance Aggregation :

A system should exist to ensure auto-aggregation of remittance advices from the following sources:

Emails: remittances could be present in the body of the email or in the form of an attachment

EDI: remittances could be sent in various EDI formats such as EDI 820, EDI 823

Web portal uploads: remittances could be uploaded in customer or third party portals

AI-based Remittance Matching :

The system should ensure seamless matching of remittance advice with the payment file received. Any change in the format of remittance or the data that is sent in the remittance should not affect the straight through processing rate of the cash application process.

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